Like many other states, Minnesota allows for the creation of a Limited Liability Company (LLC). This flexible business entity provides an affordable and easy way for business owners to protect their assets. Although not required by Minnesota law, an operating agreement further protects those with an interest in an LLC by pre-determining how the LLC will conduct business. A Bloomington LLC operating agreements lawyer could help you form an operations structure optimized for your business.
Without an operating agreement in place, Minnesota law provides for default rights and duties for the LLC and its members. Although lawmakers have done their best drafting the default rules, it may not fit the needs of your business as well as a custom operating agreement drafted by a corporate structure documents attorney in Bloomington.
What Are The Benefits of an Operating Agreement For an LLC?
Operating agreements supplant statutory default rights and duties for an LLC and its members. An operating agreement provides more control over the terms of their operations that would otherwise be governed by default provisions, article, and contracts. An operating agreement could forgo this uncertainty by unambiguously setting forth the rights and duties of all present and future parties.
In general, LLCs and corporations limit liability by shielding the personal assets of owners if creditors sue the entity but limited liability isn’t as simple as checking a box. If creditors are able to prove that the LLC or corporation is a sham (meaning the owners don’t comply with the legal formalities), the corporate veil may be pierced, and the owners’ personal assets are again at stake. An operating agreement protects the limitations on liability by demonstrating that the company and owners are operating in legal accordance and as they had planned.
Typical Provisions of an Operating Agreement Explained
An operating agreement covers many aspects of a business but some of the facets that are nearly always addressed include:
Membership is often expressed as a percentage interest. The two components of this interest are economic interest (meaning how much money someone put in) and management interest (meaning how much work a person does for the organization). An operating agreement could also further specify membership interests into classes, set forth contributions and capital accounts, and allocate profits and losses.
LLCs may be managed by members or managers. If an LLC in Bloomington hires a manager to run the operation, this section would provide the process by which managers are appointed, the duties and responsibilities of managers, the manager’s term, and procedures for replacing that manager.
How Does an Operating Agreement Affect Shareholder Voting?
An operating agreement can also alter the standard rule that members have a vote portion to the percentage of their interest. Voting can be withheld entirely by class, or upon certain matters. Voting rights can also determine capital contributions, commitments, or accounts. Due to the fact that voting has such an impact on every level of the company, having a strong operating agreement could ensure optimum performance.
Find out what a Bloomington Limited Liability Company lawyer can do for you today.
Whether you have an LLC and need an operating agreement drafted or are just starting to build your LLC and want to know your options, a Bloomington LLC operating agreements lawyer could help you create a structure that works for your business. Call today to schedule a consultation and get to work.